Are you actively mining the data in your payment processing account? If not, you may be missing opportunities to cut costs, enhance processes and improve profitability.
Delving into the details of how your card processing fees are levied, why customers request chargebacks, and which transactions may be riskiest will help you identify ways to control expenses and better meet customer needs. Regularly accessing the online dashboard that your merchant account provider offers — rather than just viewing monthly statements or accessing your payment gateway reporting portal — empowers you to:
1. Keep Interchange Rates as Low as Possible.
The card networks – Visa, MasterCard, Discover, American Express — charge as many as 250 different interchange rates based on the type of card and how it’s used. Knowing what to look for in your merchant data, and why some transactions carry higher fees, will help you make changes that direct more cash to your bottom line.
For example, make sure transactions clear correctly depending on whether it’s a sale to a business or consumer. Consumer cards usually — although not always — clear at lower rates. And if you sell big-ticket items, make sure your account is set up so you’re charged the lower fees associated with larger purchases. Likewise, you might negotiate lower fees for small transactions of $15 or less.
Understanding your interchange pricing structure is also important. Don’t assume your initial merchant account setup will continue to be the most cost-effective as you grow. Know the bottom-line impact of flat transaction pricing versus interchange-plus pricing, and adjust according to your current business needs.
2. Closely Monitor Chargebacks.
Knowing why customers request credits through their card issuers can help you reduce the frequency of chargebacks and resolve important customer service issues.
Is your billing descriptor — the business name that shows up on customers’ credit card statements — recognizable, or might it be confusing? Are there problems with fulfillment, customer service or returns? These are just a few of the factors that contribute to chargebacks and lower customer satisfaction.
Sign up for any notification services that are available on your merchant account so you are alerted and can take immediate action when a chargeback is processed. Delve into each one, and if you want to dispute any, start the process immediately — you have a limited amount of time to do so. For those requests that are legitimate, issue a refund. That’s better for your merchant account standing and your reputation with customers.
3. Spot Fraud.
Are there signs you need to improve your fraud-fighting game? An increase in fraudulent transactions — no matter how modest — should be a wake-up call.
Worldwide, fraud losses on credit cards, debit cards and prepaid cards rose to $21.84 billion in 2015 and have increased by another (estimated) 13 percent in 2016, according to The Nilson Report. Lower your chances of contributing to such statistics by studying your transaction data. Any patterns that emerge among fraudulent transactions can be noted and used to strengthen your preventive measures. For example, you may discover that especially large purchases or requests for rush shipping could signal the need to examine orders carefully before approval. Some companies will ship only to the cardholder’s billing address, or elect to do so if there are indicators that the transaction is risky.
The threat of fraud is another reason to revisit your original merchant account setup. Are there empty data fields you should be using? Are you set up to use the Address Verification System (AVS) and Card Verification Value (CVV) security codes? Are you reviewing your batch transactions to identify when a customer repeatedly tries to use the same card number — a likely sign of fraud?
"The more insight you have...the more quickly you can react and resolve issues."
These are just a few of the reasons you should look at your payment data weekly, if not daily. Make it easier by setting up recurring reports that can be emailed to you and imported directly into your accounting or ERP system. The more insight you have into the costs associated with accepting payment cards, the more quickly you can react and resolve issues.
Contact your SVB Global Treasury and Payments Advisor, or read more about SVB Global Merchant Services and how we can help you process card payments cost-effectively.
Read more in our series on how to optimize your company’s payments tools and processes on SVB’s Payments Trends and Insights page.
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which have not been independently verified by us; and, as such, we do not represent that the information is accurate or complete. You should obtain relevant and specific professional advice before making any investment or other decision. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.
All non-SVB named companies listed throughout this document, as represented with the various statistical, thoughts, analysis and insights shared in this document, are independent third parties and are not affiliated with SVB Financial Group.